In this paper we address the issue of how transmission uncertainty could affect the choice between a federal monetary policy based on national data and one on aggregated data. We find that the uncertainty about the transmission process increases the need to take into account information about...

We demonstrate how endogenous information acquisition in venture capital markets creates investment cycles when competing financiers undertake their screening decisions in an uncoordinated way, thereby highlighting the role of intertemporal screening externalities induced by competition among...

The pending enlargement of the European Monetary Union (EMU) has brought to the fore the discussion of the voting right distribution in the European Central Bank (ECB) council. We show that, in a model where labor unions internalize the inflationary consequences of wage setting, deviating from a...

We consider VAR models for variables exhibiting cointegration and comon cyclical features. While the presence of cointegration reduces the rank of the long-run multiplier matrix, other types of common features lead to rank reduction of the short-run dynamics. We distinguish between strong and...

We show in a union-bargaining model that a decrease in the unemployment benefit level increases not only equilibrium employment, but also nominal wage flexibility, and thus reduces employment variations in the case of nominal shocks. Long-term wage contracts lead to higher expected real wages...

An economy exhibits structural heterogeneity when the forecasts of different agents have different effects on the determination of aggregate variables. Various forms of structural heterogeneity can arise and we study the important case of economies in which agents' behavior depends on forecasts...

In a standard New Keynesian model, a myopic central bank concerned with stabilizing inflation and changes in the output gap will implement a policy under discretion that replicates the optimal, timeless perspective, precommitment policy. By stabilizing output gap changes, the central bank...

In this paper an Unobserved Components Model is employed to decompose U.S. real GDP into trend and cycle components. The main findings are that there exist three cycles with a period of about two, five and 13 years, respectively, and that the long-run development during the last 50 years can be...

What political objective should a common central bank in a heterogeneous monetary union pursue? Should it base its decisions on the EU-wide average of inflation and growth or should it instead focus on (appropriately weighted) national rates of inflation and growth? We find that a central bank...